Devyani International Ltd. share price target

We met with Mr. Manish Dawar, CFO of Devyani International (DIL), to discuss the current demand trends, the company’s growth outlook across business verticals, and its long-term strategy.

Devyani International Limited (DIL) posted another quarter of muted performance in Q2FY2025, with KFC’s and Pizza Hut’s SSSG declining by 7% and 5.7%, respectively. Revenue growth of 49% y-o-y was mainly led by the integration of Thailand’s KFC business.

DIL’s Q2 EBITDA was ~13% below our estimate, on margin miss in KFC and higher HO costs.

Devyani International Ltd’s (DEVYANI) consol. revenue grew 49% YoY (est. +42%), including the recent acquisition in Thailand.

DIL's Q4 EBITDA was 7-8% higher vs. our estimates, largely helped by strong
cost optimization as topline was weaker. Given a glut of weak consumption
trends, with 7/14% SSG decline in KFC/PH, a flat margin is commendable (vs.
250bps QoQ margin decline for Sapphire PH/KFC).

Devyani International (Devyani) reported 38.7% YoY revenue growth in
4QFY24, including the Thailand acquisition. The organic growth (exacquisition) is expected to be ~5% YoY (est. 7.5%) despite a 20% store growth.

DEVYANI delivered a strong performance in 3QFY22, with an improvement on all operating metrics. Both KFC and Pizza Hut (PH) saw a sequential improvement in ADS to INR124k and INR47k, respectively, despite the addition of a large number of stores in the past five quarters. While strong demand tailwinds in 3QFY22 boosted KFC's ADS, the same may normalize going forward. However, the gradual uptick in ADS for PH is likely to continue on account of the brand's focus on the delivery channel. The company delivered a pre-Ind AS EBITDA of 16.4% in 3QFY22 (up 430bp...

Growth through expansion

165 Equity Shares and in multiples thereof. Public issue of 204,222,219 Equity shares of Face value Rs. 1 each, (Comprising of fresh issue of 48,888,889 Equity Shares* (Rs. 440 cr.) and Offer for Sale of...

India's QSR to grow at ~12% over next five years The Indian QSR industry has grown at a CAGR of 3% in the last five years to US$40 billion (bn) in 2020. Further, it is likely to grow at a higher rate of ~10% to become ~US$65 bn industry by 2025. Rapid growth in QSR will be aided by increased urbanisation supported by a younger population with rising income levels and excess disposable income. Also, QSR is expected to experience a rise in number of transactions and average transaction amount due to the short service time at an affordable price offered by QSR....

Devyani International Ltd. (DIL) is an associate company of RJ Corp, the largest bottling partner of food and beverages (F&B;) major Pepsico, and has interests in the Indian retail F&B; sector. It is the largest franchisee of Yum Brands, operating core brands such as Pizza Hut, KFC, Costa Coffee besides its own brands such as Vaango, Food Street, Masala...

Devyani International Ltd (DIL) is the largest franchisee of Yum Brands in India and is among the largest chain operators of quick service restaurants (QSR) in India on a non-exclusive basis, and operates 696 stores across 166 cities in India, as of June 30, 2021.Yum! Brands Inc. operates brands such as KFC, Pizza Hut and

IPO Note

Devyani International Limited IPO Note Issue Open: Aug 04 Aug 06 2021 Price Band: Rs. 86 90 *Issue Size: 204,222,219 eq shares (Fresh Issue of Rs.440 cr + Offer for sale of 155,333,330 eq sh) Issue Size: Rs.1756.31 1838.0 cr Reservation for: QIB atleast 75% eq sh Non Institutional Upto 15% eq sh Retail Upto 10% eq sh Employee Upto 550,000 eq sh

We recommend subscribe to IPO of DIL. We believe DIL is on the verge of a new growth phase for the company led by 1) KFC's leadership in Chicken segment 2) strong brand recall and growth prospects of Pizza hut with just 297 stores (1300+ by Dominos) 3) Acquisition of 73 KFC stores of Yum over past 3 years 4) Aggressive expansion with addition of 90 stores in the last 6 months and likely hood of sustaining trend 5) move towards smaller delivery formats for KFC & Pizza Hut (share of delivery up from 50-70% between FY20/21) to achieve faster growth and higher margins and lower payback...